(reit) financial report for fiscal period ended july 31,...

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(REIT) Financial Report for Fiscal Period Ended July 31, 2018

September 13, 2018

REIT Securities Issuer: Star Asia Investment Corporation (SAR) Stock Exchange Listing: Tokyo Stock Exchange Securities Code: 3468 URL: http://starasia-reit.com

Representative: Atsushi Kato, Executive Director Asset Management Company: Star Asia Investment Management Co., Ltd. (the Asset Management Company) Representative: Atsushi Kato, President and CEO Contact: Toru Sugihara, Director and CFO TEL: 03-5425-1340 Scheduled date of commencement of cash distribution payment: October 15, 2018 Scheduled date of submission of securities report: October 30, 2018 Preparation of supplementary financial results briefing materials: Yes Holding of financial results briefing session: Yes (for institutional investors and analysts)

(Amounts are rounded down to the nearest million yen)

1. Status of Management and Assets for Fiscal Period Ended July 31, 2018 (from February 1, 2018 to July 31, 2018)

(1) Management Status (% figures are the rate of period-on-period increase (decrease)) Fiscal period Operating revenue Operating income Ordinary income Net income

million yen % million yen % million yen % million yen % Ended Jul. 2018 2,810 (12.0) 1,576 (23.2) 1,305 (30.4) 1,305 (27.6) Ended Jan. 2018 3,194 (0.5) 2,051 (2.2) 1,876 2.3 1,802 (1.7)

Fiscal period Net income

per unit Ratio of net income

to equity Ratio of ordinary income

to total assets Ratio of ordinary income

to operating revenue

yen % % % Ended Jul. 2018 2,775 2.9 1.5 46.5 Ended Jan. 2018 4,349 4.3 2.3 58.7

(2) Status of Cash Distribution

Fiscal period

Cash distribution per unit

(not including cash distribution in excess of

earnings)

Total cash distribution

(not including cash distribution in excess of

earnings)

Cash distribution in excess of

earnings per unit

Total cash distribution

in excess of earnings

Cash distribution payout ratio

Ratio of cash distribution to

net assets

yen million yen yen million yen % %

Ended Jul. 2018 2,773 1,305 0 0 100.0 2.8

Ended Jan. 2018 4,077 1,689 0 0 93.7 4.0

(Note1) For the fiscal period ended July 31, 2018, cash distribution payout ratio is calculated by the following formula due to changes

in the number of investment units during the period following issuance of new investment units during the period:

Cash distribution payout ratio = Total cash distribution (not including cash distribution in excess of earnings) ÷ Net income ×

100

(Note2) For the fiscal period ended January 31, 2018, total cash distribution differs from net income due to internal reserve.

(3) Financial Position Fiscal period Total assets Net assets Equity ratio Net assets per unit

million yen million yen % yen Ended Jul. 2018 93,553 47,287 50.5 100,477 Ended Jan. 2018 82,154 41,870 51.0 101,063

(4) Status of Cash Flows

Fiscal period Net cash

provided by (used in) operating activities

Net cash provided by (used in)

investing activities

Net cash provided by (used in)

financing activities

Cash and cash equivalents at end of period

million yen million yen million yen million yen Ended Jul. 2018 1,366 (11,055) 9,986 5,118 Ended Jan. 2018 4,220 (1,027) (3,210) 4,820

http://starasia-reit.com/

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2. Management Status Forecast for Fiscal Period Ending January 31, 2019 (from August 1, 2018 to January 31, 2019) and Fiscal Period Ending July 31, 2019 (from February 1, 2019 to July 31, 2019)

(% figures are the rate of period-on-period increase (decrease))

Fiscal period Operating revenue Operating income Ordinary income Net income


(not including cash distribution

in excess of earnings)

Cash distribution in excess of earnings

per unit

million yen % million yen % million yen % million yen % yen yen

Ending Jan. 2019 3,795 35.0 2,298 45.8 1,936 48.3 1,936 48.3 3,580 0

Ending Jul. 2019 3,700 (2.5) 2,130 (7.3) 1,839 (5.0) 1,838 (5.0) 3,400 0 (Reference) Forecast net income per unit (fiscal period ending January 31, 2019) 3,580 yen

Forecast net income per unit (fiscal period ending July 31, 2019) 3,400 yen

(Note) Net income per unit is calculated by the following formula.

Expected net income ÷ expected total number of investment units issued and outstanding at end of period

* Other

(1) Changes in Accounting Policies, Changes in Accounting Estimates, and Retrospective Restatement

① Changes in accounting policies accompanying amendments to accounting standards, etc.: No

② Changes in accounting policies other than ①: No

③ Changes in accounting estimates: No

④ Retrospective restatement: No

(2) Total Number of Investment Units Issued and Outstanding

① Total number of investment units issued and outstanding (including own investment units) at end of period

Fiscal period ended Jul. 31, 2018 470,624 units Fiscal period ended Jan. 31, 2018 414,300 units

② Number of own investment units at end of period

Fiscal period ended Jul. 31, 2018 0 units Fiscal period ended Jan. 31, 2018 0 units

(Note) For the number of investment units serving as the basis for calculation of net income per unit, please see “Notes on Per Unit Information” on page 21.

* Presentation of Status of Implementation of Audit Procedures

At the time of disclosure of this financial report, audit procedures for financial statements pursuant to the Financial Instruments and

Exchange Act have not been completed.

* Explanation of Appropriate Use of Management Status Forecast, and Other Matters of Special Note

The management status outlook and other forward-looking statements contained in this document are based on information that

are currently available and certain assumptions that are deemed reasonable by SAR. Accordingly, the actual management status, etc.

may differ materially due to various factors. In addition, the forecast figures are the current figures calculated under the assumptions

described in “Assumptions Underlying Operating Results Forecasts for Fiscal Period Ending January 31, 2019 and Fiscal Period Ending

July 31, 2019” on pages 3-4. Accordingly, the actual operating revenue, operating income, ordinary income, net income, cash

distribution per unit (not including cash distribution in excess of earnings) and cash distribution in excess of earnings per unit may

vary due to acquisition/disposition of real estate, etc., trends of the real estate market, etc., fluctuations in interest rates or other

changes in the circumstances surrounding SAR, etc. in the future. In addition, the forecast is not a guarantee of the amount of cash

distribution.

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Assumptions Underlying Operating Results Forecasts for

Fiscal Period Ending January 31, 2019 and Fiscal Period Ending July 31, 2019

Item Assumptions

Calculation period Fiscal period ending January 31, 2019: August 1, 2018 – January 31, 2019 (184 days) Fiscal period ending July 31, 2019: February 1, 2019 – July 31, 2019 (181 days)

Investment assets

For the real estate beneficiary interest in trust of the 35 properties (referred to as the “Existing Properties (real estate, etc.)” hereinafter in these assumptions) and 2 Mezzanine Loan Debt (referred to as the “Existing Properties (mezzanine)” hereinafter in these assumptions) held by SAR as of today (hereinafter collectively referred to as the “Existing Properties”), it is assumed there will be no change (new property acquisitions, sales of the Existing Properties, etc.) other than “Transfer” as described below in the investment assets through the end of the fiscal period ending July 31, 2019. <Transfer>

Property name: Hakata-eki Higashi 113 Building Planned transfer date:

1st (49% quasi-co-ownership interest) December 3, 2018 2nd (51% quasi-co-ownership interest) February 1, 2019

Property name: Urban Park Shin-Yokohama Planned transfer date: October 11, 2018

In practice, this may vary due to changes in investment assets.

Operating revenue

Rent revenues from the Existing Properties (real estate, etc.) are calculated based on the rent stated in the lease agreements that are effective as of today taking factors such as market movement into consideration. It is also assumed that there will be no arrears or non-payment of rent by tenants.

Interest revenues or dividend revenues from the Existing Properties (mezzanine) are calculated based on outlines or trust agreements which define contents of the Existing Properties (mezzanine) that are effective as of today. It is also assumed that no interest payments or dividend payments will be declined.

Gain on sales of Hakata-eki Higashi 113 Building is expected to be 401 million yen for the fiscal period ending January 31, 2019 and 418 million yen for the fiscal period ending July 31, 2019 and gain on sales of Urban Park Shin-Yokohama is expected to be 177 million yen for the fiscal period ending January 31, 2019. In practice, this may vary due to the success or failure of transaction, transfer price and transfer date, among other factors.

Operating expenses

Among expenses related to rent business of the Existing Properties (real estate, etc.), which are the principal operating expenses, expenses excluding depreciation are calculated on the basis of historical data, reflecting variable factors of expenses.

Fixed property taxes, city planning taxes and other public charges are expected to be 175 million yen in fiscal period ending January 31, 2019 and to be 238 million yen in fiscal period ending July 31, 2019. When acquiring properties, fixed property taxes, city planning taxes and other public charges in the fiscal year will be settled on a pro rata basis based on the number of days of ownership with the seller at the time of acquisition of the properties. However, in the case of SAR, the settled amount will be included in the acquisition cost and thus those for the real estate beneficiary in trust of the 6 properties acquired in February 2018 and the 6 properties acquired in September 2018 will not be recorded as expenses for the fiscal period ending January 31, 2019. Fixed property taxes, city planning taxes and other public charges for those properties are expected to be 70 million yen in fiscal period ending July 31, 2019.

For the expenditures for repair and maintenance of buildings, 81 million yen is expected for the fiscal period ending January 31, 2019 and 80 million yen is expected for the fiscal period ending July 31, 2019 based on repair and maintenance plans drawn up by Star Asia Investment Management Co., Ltd. However, the expenditures for repair and maintenance for the fiscal periods could differ significantly from the estimated amounts, as expenditures may arise urgently due to damage to buildings and such caused by unexpected factors, and because the variance in amounts generally tends to be significant from year to year and repair and maintenance expenses do not arise regularly.

Depreciation is calculated using the straight line method including ancillary costs and is expected to be 415 million yen for the fiscal period ending January 31, 2019 and 427 million yen for the fiscal period ending July 31, 2019.

NOI (Net Operating

Income)

The total NOI of the entire portfolio is expected to be 2,481 million yen for the fiscal period ending January 31, 2019 and 2,478 million yen for the fiscal period ending July 31, 2019.

NOI is calculated by using the following calculation method. NOI = rent revenue – rent expenses (excluding depreciation)

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Item Assumptions

Non-operating expenses

Temporary expenses from issuance of new investment units through public offering and third-party allotment resolved at the Board of Directors meetings on August 21, 2018 and August 29, 2018 are expected to be 50 million yen for the fiscal period ending January 31, 2019.

Interest expenses are expected to be 149 million yen for the fiscal period ending January 31, 2019 and 156 million yen for the fiscal period ending July 31, 2019 and other borrowing related expenses are expected to be 161 million yen for the fiscal period ending January 31, 2019 and 133 million yen for the fiscal period ending July 31, 2019.

In other borrowing related expenses noted above, expected temporary expenses (90 million yen for the fiscal period ending January 31, 2019 and 65 million yen for the fiscal period ending July 31, 2019) from debt financing or refinancing are included.

Debt financing

The total amount of interest-bearing liabilities is assumed to be 52,340 million yen as of the end of the fiscal period ending January 31, 2019 and 50,880 million yen as of the end of the fiscal period ending July 31, 2019.

As of today, SAR has 56,360 million yen balance of outstanding borrowings. It is assumed to prepay 4,020 million yen by the end of the fiscal period ending January 31, 2019 by using

the paid-in money for issuance of the new investment units through third-party allotment described in “Investment units” below, transfer proceeds from the Transfer, and consumption tax refund resulting from the acquisition of properties and payment of other various expenses in the fiscal period ending July 31, 2018.

It is assumed to prepay 1,460 million yen by the end of the fiscal period ending July 31, 2019 by using consumption tax refund resulting from the acquisition of properties and payment of other various expenses in the fiscal period ending January 31, 2019 as well as the transfer proceeds from the Transfer.

Except for those to be prepaid as above, it is assumed that 7,300 million yen of loans payable due for repayment by the end of the fiscal period ending July 31, 2019 will be refinanced in the term.

Other than the above, it is assumed that there will be no new borrowings or repayments of existing borrowings including prepayments by the end of the fiscal period ending July 31, 2019.

Investment units

It is assumed that, in addition to the total number of investment units issued and outstanding as of today (537,481 units), all of the new investment units to be issued through third-party allotment (up to 3,343 units), respectively resolved at the Board of Directors meeting held on August 21,2018 and August 29, 2018 will be issued in full.

Other than the above, it is assumed that there will be no changes in the number of investment units issued due to additional issuance, etc. of investment units by the end of the fiscal period ending July 31, 2019.


(not including cash distribution

in excess of earnings)

Cash distribution per unit (not including cash distribution in excess of earnings) is calculated on the assumption described in the cash distribution policy stipulated in SAR’s Articles of Incorporation.

It is assumed that derivative transactions (interest rate swaps) will continue to be conducted. However, it is also assumed that deferred losses on hedges, which is an item of deduction from net assets (as those provided in article 2, item 30 (b) of the Ordinance on Accountings of Investment Corporations), is not expected to arise until the end the fiscal period ending July 31, 2019, and cash distribution per unit (not including cash distribution in excess of earnings) will not be affected by changes in items of deduction from net assets in the calculation.

It is possible that the cash distribution per unit (not including cash distribution in excess of earnings) could change due to various factors, including changes in investment assets, changes in rent revenue accompanying changes in tenants, etc., or unexpected repair and maintenance, etc. In addition, cash distribution per unit (not including cash distribution in excess of earnings) may be affected by changes in items of deduction from net assets.

Cash distribution in excess of earnings

per unit

It is assumed that there will be no existing balance of deferred losses on hedges, which is an item of deduction from net assets, as described above. Of cash distribution in excess of earnings, that attributable to allowance for temporary difference adjustment is not scheduled at this point.

In addition, of cash distribution in excess of earnings, that falling under the category of cash distribution accompanying decrease in capital, etc. under tax law is not scheduled at this point.

Other

Forecasts are based on the assumption that revisions that impact the above forecast figures will not be made to laws and regulations, tax systems, accounting standards, listing rules, and rules of The Investment Trusts Association, Japan, etc.

Forecasts are based on the assumption that there will be no major unforeseen changes to general economic trends and real estate market conditions, etc.

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3. Financial Statements

(1) Balance Sheet

(Unit: thousand yen)

4th fiscal period

(As of January 31, 2018)

5th fiscal period (As of July 31, 2018)

Assets

Current assets

Cash and deposits 1,667,713 2,000,005

Cash and deposits in trust 3,153,262 3,118,735

Operating accounts receivable 44,669 50,970

Prepaid expenses 90,216 118,176

Consumption taxes receivable - 210,713

Other 5,354 16,157

Total current assets 4,961,216 5,514,759

Non-current assets

Property, plant and equipment

Buildings in trust 24,909,318 28,549,452

Accumulated depreciation (1,055,284 ) (1,407,469 )

Buildings in trust, net 23,854,033 27,141,983

Structures in trust 9,606 9,606

Accumulated depreciation (733 ) (1,070 )

Structures in trust, net 8,872 8,536

Machinery and equipment in trust 20,707 45,901

Accumulated depreciation (1,240 ) (2,718 )

Machinery and equipment in trust, net 19,467 43,183

Tools, furniture and fixtures in trust 20,207 22,442

Accumulated depreciation (2,314 ) (4,123 )

Tools, furniture and fixtures in trust, net 17,892 18,318

Land in trust 48,929,717 56,437,510

Total property, plant and equipment 72,829,984 83,649,531

Intangible assets

Leasehold rights in trust 3,459,138 3,459,138

Total intangible assets 3,459,138 3,459,138

Investments and other assets

Investment securities 734,500 734,500

Long-term prepaid expenses 121,333 155,717

Lease and guarantee deposits 10,000 10,000

Other 38,473 29,887

Total investments and other assets 904,307 930,105

Total non-current assets 77,193,430 88,038,774

Total assets 82,154,646 93,553,534

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4th fiscal period


5th fiscal period (As of July 31, 2018)

Liabilities

Current liabilities

Operating accounts payable 292,304 190,118

Current portion of long-term loans payable 7,300,000 8,490,000

Accounts payable - other 289,696 251,986

Accrued expenses 6,054 8,643

Income taxes payable 74,345 605

Accrued consumption taxes 126,003 21,000

Advances received 338,283 594,306

Other 10,925 9,842

Total current liabilities 8,437,613 9,566,503

Non-current liabilities

Long-term loans payable 30,050,000 34,740,000

Tenant leasehold and security deposits in trust 1,794,980 1,959,368

Other 1,507 493

Total non-current liabilities 31,846,487 36,699,861

Total liabilities 40,284,100 46,266,365

Net assets

Unitholders’ equity

Unitholders’ capital 40,031,185 45,832,670

Surplus

Unappropriated retained earnings (undisposed loss) 1,802,393 1,418,609

Total surplus 1,802,393 1,418,609

Total unitholders’ equity 41,833,579 47,251,279

Valuation and translation adjustments

Deferred gains or losses on hedges 36,966 35,889

Total valuation and translation adjustments 36,966 35,889

Total net assets *1 41,870,546 *1 47,287,168

Total liabilities and net assets 82,154,646 93,553,534

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(2) Statement of Income


4th fiscal period

From: August 1, 2017 To: January 31, 2018

5th fiscal period From: February 1, 2018

To: July 31, 2018

Operating revenue

Lease business revenue *1 2,255,617 *1 2,631,029

Other lease business revenue *1 152,654 *1 160,946

Gain on sales of real estate property *2 771,663 -

Other revenue 14,412 18,476

Total operating revenue 3,194,348 2,810,451

Operating expenses

Expenses related to rent business *1 841,650 *1 963,758

Asset management fee 211,612 193,319

Asset custody and administrative service fees 19,515 20,323

Directors’ compensations 2,400 2,400

Other operating expenses 67,331 54,427

Total operating expenses 1,142,509 1,234,229

Operating income 2,051,838 1,576,222

Non-operating income

Interest income 24 26

Interest on refund 771 -

Total non-operating income 795 26

Non-operating expenses

Interest expenses 92,575 112,385

Borrowing related expenses 55,587 149,537

Investment unit issuance expenses 27,928 7,405

Other - 1,000

Total non-operating expenses 176,091 270,327

Ordinary income 1,876,542 1,305,921

Income before income taxes 1,876,542 1,305,921

Income taxes - current 74,348 605

Income taxes - deferred 20 -

Total income taxes 74,369 605

Net income 1,802,173 1,305,316

Retained earnings brought forward 220 113,292

Unappropriated retained earnings (undisposed loss) 1,802,393 1,418,609

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(3) Statement of Unitholders’ Equity

4th fiscal period (from August 1, 2017 to January 31, 2018) (Unit: thousand yen)

Unitholders’ equity Valuation and translation

adjustments

Total

net assets

Unitholders’ capital

Surplus

Total unitholders’

equity

Deferred gains or losses

on hedges

Total

valuation and translation

adjustments

Unappropriated retained earnings

(undisposed loss)

Total surplus

Balance at beginning of the

period 40,031,185 1,832,669 1,832,669 41,863,855 28,686 28,686 41,892,541

Changes of items during the

period

Dividends from surplus (1,832,448) (1,832,448) (1,832,448) (1,832,448)

Net income 1,802,173 1,802,173 1,802,173 1,802,173

Net changes of items other

than unitholders’ equity 8,280 8,280 8,280

Total changes of items during

the period - (30,275) (30,275) (30,275) 8,280 8,280 (21,995)

Balance at end of the period *1 40,031,185 1,802,393 1,802,393 41,833,579 36,966 36,966 41,870,546

5th fiscal period (from February 1, 2018 to July 31, 2018) (Unit: thousand yen)

Unitholders’ equity Valuation and translation

adjustments

Total

net assets

Unitholders’ capital

Surplus

Total unitholders’

equity

Deferred gains or losses

on hedges

Total

valuation and translation

adjustments

Unappropriated retained earnings

(undisposed loss)

Total surplus

Balance at beginning of the

period 40,031,185 1,802,393 1,802,393 41,833,579 36,966 36,966 41,870,546

Changes of items during the

period

Issuance of new

investment units 5,801,484 5,801,484 5,801,484

Dividends from surplus (1,689,101) (1,689,101) (1,689,101) (1,689,101)

Net income 1,305,316 1,305,316 1,305,316 1,305,316

Net changes of items other

than unitholders’ equity (1,077) (1,077) (1,077)

Total changes of items during

the period 5,801,484 (383,784) (383,784) 5,417,699 (1,077) (1,077) 5,416,622

Balance at end of the period *1 45,832,670 1,418,609 1,418,609 47,251,279 35,889 35,889 47,287,168

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(4) Statement of Cash Distributions

(Unit: yen)

4th fiscal period



To: July 31, 2018

I. Unappropriated retained earnings 1,802,393,825 1,418,609,155

II. Cash distribution

[Cash distribution per unit]

1,689,101,100

[4,077]

1,305,040,352

[2,773]

Cash distribution of earnings

[Cash distribution of earnings per unit]

1,689,101,100

[4,077]

1,305,040,352

[2,773]

III. Retained earnings carried forward 113,292,725 113,568,803

Method of calculation of amount of cash distribution

4th fiscal period (from August 1, 2017 to January 31, 2018):

Pursuant to the cash distribution policy provided in Article 35, Paragraph 1 of SAR’s Articles of Incorporation, SAR shall distribute in

excess of the amount equivalent to 90% of the amount of distributable earnings of SAR as defined in Article 67-15 of the Act on

Special Measures Concerning Taxation. In accordance with such policy, concerning cash distribution of earnings (not including cash

distribution in excess of earnings), the decision was made considering 771,663,395 yen of gain on sales of real estate property to

distribute 1,689,101,100 yen, which is the minimum multiple of the total number of issued and outstanding investment units, with

amount exceeding 90% of income before income taxes and 113,072,147 yen of net income was decided to be reserved internally.

5th fiscal period (from February 1, 2018 to July 31, 2018):

Pursuant to the cash distribution policy provided in Article 35, Paragraph 1 of SAR’s Articles of Incorporation, SAR shall distribute in

excess of the amount equivalent to 90% of the amount of distributable earnings of SAR as defined in Article 67-15 of the Act on

Special Measures Concerning Taxation. In accordance with such policy, concerning cash distribution of earnings (not including cash

distribution in excess of earnings), the decision was made to distribute 1,305,040,352 yen, which is the entire amount of the net

income but excluding the portion where cash distribution of earnings per unit becomes a fractional amount of less than 1 yen, as

cash distribution of earnings.

－ 10 －

(5) Statement of Cash Flows


4th fiscal period



To: July 31, 2018

Cash flows from operating activities

Income before income taxes 1,876,542 1,305,921

Depreciation 305,290 355,808

Investment unit issuance expenses 27,928 7,405

Interest income (24 ) (26 )

Interest expenses 92,575 112,385

Decrease (increase) in operating accounts receivable 8,075 (6,300 )

Decrease (increase) in consumption taxes refund receivable 261,743 (210,713 )

Increase (decrease) in accrued consumption taxes 113,269 (105,003 )

Decrease (increase) in prepaid expenses 18,729 (27,960 )

Decrease (increase) in long-term prepaid expenses 24,922 (34,383 )

Increase (decrease) in operating accounts payable 84,485 (49,856 )

Increase (decrease) in accounts payable - other 14,243 (45,613 )

Increase (decrease) in advances received (251,394 ) 256,022

Decrease from sales of property, plant and equipment in trust 1,744,836 -

Other, net (5,941 ) (4,875 )

Subtotal 4,315,282 1,552,810

Interest income received 24 26

Interest expenses paid (93,627 ) (109,795 )

Income taxes paid (1,027 ) (76,159 )

Net cash provided by (used in) operating activities 4,220,652 1,366,881

Cash flows from investing activities

Purchase of property, plant and equipment in trust (224,406 ) (11,219,780 )

Repayments of tenant leasehold and security deposits in trust (128,352 ) (45,598 )

Proceeds from tenant leasehold and security deposits in trust 59,996 209,986

Purchase of investment securities (734,500 ) -

Net cash provided by (used in) investing activities (1,027,262 ) (11,055,392 )

Cash flows from financing activities

Proceeds from long-term loans payable - 13,460,000

Repayments of long-term loans payable (1,380,000 ) (7,580,000 )

Proceeds from issuance of investment units - 5,794,079

Dividends paid (1,830,353 ) (1,687,802 )

Net cash provided by (used in) financing activities (3,210,353 ) 9,986,276

Net increase (decrease) in cash and cash equivalents (16,962 ) 297,765

Cash and cash equivalents at beginning of period 4,837,939 4,820,976

Cash and cash equivalents at end of period *1 4,820,976 *1 5,118,741

－ 11 －

(6) Notes on the Going Concern Assumption

Not applicable.

(7) Notes on Matters Concerning Significant Accounting Policies

1. Evaluation standards

and methods of

valuation of securities

Other securities:

Those with fair value

Fair value method or market value method (Variances are directly included in net assets.)

2. Method of

depreciation of

non-current assets

Property, plant and equipment (including trust assets)

The straight-line method is adopted. The useful life of primary property, plant and equipment is as

follows:

Buildings 5-69 years

Structures 10-15 years

Machinery and equipment 10 years

Tools, furniture and fixtures 3- 6 years

3. Accounting for

deferred assets

Investment unit issuance expenses

The entire amount is expensed as incurred.

4. Standards for

revenue and expense

recognition

Accounting for fixed property tax, etc.

Accounting for fixed property tax, city planning tax, depreciable asset tax, etc. (“fixed property tax,

etc.”) on real estate or beneficiary interest in trust for real estate held is that, of the tax amount

assessed and determined, the amount corresponding to the concerned calculation period is expensed

as expenses related to rent business.

The amount equivalent to fixed property tax, etc. in the initial fiscal year borne by SAR upon

acquisition of real estate or beneficiary interest in trust for real estate is not recognized as expenses

but included in the cost of acquisition of the concerned real estate, etc. In the fiscal period under

review, the amount equivalent to fixed property tax, etc. included in the cost of acquisition of real

estate, etc. was 41,165 thousand yen.

5. Method of

hedge accounting

(1) Hedge accounting approach

Deferral hedge accounting is adopted.

(2) Hedging instruments and hedged items

Hedging instruments: Interest rate swap transaction

Hedged items: Interest on loans

(3) Hedging policy

SAR conducts derivative transactions for the purpose of hedging the risks provided in its Articles

of Incorporation pursuant to rules and regulations.

(4) Method of assessing the effectiveness of hedging

The effectiveness of hedging is assessed by comparing the cumulative change in cash flows of

the hedging instruments with the cumulative change in cash flows of the hedged items and

verifying the ratio of the amount of change in the two.

6. Scope of funds

in the statement of

cash flows (cash and

cash equivalents)

The funds (cash and cash equivalents) in the statement of cash flows comprise cash on hand and cash

in trust, demand deposits and deposits in trust, and short-term investments with a maturity of three

months or less from the date of acquisition that are readily convertible to cash and that are subject

to an insignificant risk of changes in value.

7. Other significant

matters serving as the

basis for preparation

of financial statements

(1) Accounting for beneficiary interest in trust for real estate, etc.

Concerning beneficiary interest in trust for real estate, etc. held, all accounts of assets and

liabilities within trust assets as well as all accounts of revenue and expenses from the trust assets

are recognized in the relevant account item of the balance sheet and the statement of income.

The following material items of the trust assets recognized in the relevant account item are

separately listed on the balance sheet.

① Cash and deposits in trust

② Buildings in trust; Structures in trust; Machinery and equipment in trust; Tools, furniture and

fixtures in trust; Land in trust

③ Leasehold rights in trust

④ Tenant leasehold and security deposits in trust

(2) Accounting for consumption tax, etc.

The accounting for consumption tax and local consumption tax is the taxes are excluded from the

transaction amounts.

Non-deductible consumption tax on acquisition of assets is included in the acquisition cost of

each asset.

－ 12 －

(8) Notes to the Financial Statements

[Notes to the Balance Sheet]

*1 Minimum net assets as provided in Article 67, Paragraph 4 of the Act on Investment Trusts and Investment Corporations


4th fiscal period

(As of January 31, 2018) 5th fiscal period

(As of July 31, 2018)

50,000 50,000

[Notes to the Statement of Income]

*1 Breakdown of operating income (loss) from real estate leasing


4th fiscal period



To: July 31, 2018

A. Operating revenue from real estate leasing

Lease business revenue

Rental revenue

Common area maintenance revenue

Parking revenue

Facility use revenue

Other rental revenue

1,997,374

187,680

60,958

7,738

1,865

2,255,617

2,354,911

201,909

64,005

7,346

2,857

2,631,029

Other lease business revenue

Utilities reimbursement

Other revenue

134,400

18,254

152,654

127,053

33,892

160,946

Total operating revenue from real estate leasing 2,408,272 2,791,975

B. Operating expenses from real estate leasing

Expenses related to rent business

Management fee

Utilities expenses

Taxes and dues

Repair expenses

Trust fee

Insurance premium

Depreciation

Other expenses

121,151

137,730

139,112

59,548

10,740

3,772

305,290

64,304

130,310

130,997

175,769

68,389

11,036

4,046

355,808

87,399

Total operating expenses from real estate leasing 841,650 963,758

C. Operating income (loss) from real estate leasing [A－B] 1,566,622 1,828,216

－ 13 －

*2 Breakdown of gain on sales of real estate property

4th fiscal period (From: August 1, 2017 To: January 31, 2018) Oak MinamiAzabu (51% of quasi coownership interest)

Real Estate Sale Income 2,560,200

Real Estate Sale Cost 1,744,836

Other Real Estate Sale Expenses 43,699

Gain on Real Estate Sale 771,663

5th fiscal period (From: February 1, 2018 To: July 31, 2018)

Not applicable

[Notes to the Statement of Unitholders’ Equity]

*1 Total number of investment units authorized and total number of investment units issued and outstanding

4th fiscal period



To: July 31, 2018

Total number of investment units authorized 10,000,000 units 10,000,000 units

Total number of investment units issued and outstanding 414,300 units 470,624 units

[Notes to the Statement of Cash Flows]

*1 Reconciliation of cash and cash equivalents at end of period to the amount of balance sheet items


4th fiscal period



To: July 31, 2018

Cash and deposits 1,667,713 2,000,005

Cash and deposits in trust 3,153,262 3,118,735

Cash and cash equivalents 4,820,976 5,118,741

[Notes on Lease Transactions]

Operating leases (as lessor)

Future minimum lease payments


4th fiscal period

As of Jan. 31, 2018 5th fiscal period

As of Jul. 31, 2018

Not later than 1 year 1,597,468 1,976,658

Later than 1 year 3,175,890 4,192,795

Total 4,773,358 6,169,453

－ 14 －

[Notes on Financial Instruments]

1. Matters concerning status of financial instruments

(1) Policy for handling financial instruments

SAR shall procure funds to allocate to acquisition of real estate related assets, repayment of interest‐bearing liabilities,

etc. through mainly issuance of investment units, borrowing from financial institutions, issuance of investment

corporation bonds, etc. Upon procuring funds through interest‐bearing liabilities, due consideration shall be given to

fund procurement agility and financial stability.

(2) Description of financial instruments and associated risks, and risk management system

The funds procured through loans, which shall be for the purpose of mainly acquisition of assets, are exposed to liquidity

risk until the repayment date, but the concerned risks are managed by taking such measures as lengthening the

procurement periods and staggering the maturities. In addition, loans with floating interest rates are exposed to interest

rate fluctuation risk, but derivative transactions (interest rate swap transactions) are utilized as hedging instruments to,

in effect, convert interest rates to fixed rates in order to mitigate that risk. For the hedge accounting approach, hedging

instruments, hedged items, hedging policy and method of assessing the effectiveness of hedging, please refer to “5.

Method of hedge accounting” described under “Notes on Matters Concerning Significant Accounting Policies” earlier in

this document.

(3) Supplementary explanation to matters concerning fair value, etc. of financial instruments

Not applicable.

2. Matters concerning fair value, etc. of financial instruments

The carrying amount and fair value as of January 31, 2018, and the amount of difference between these, are as follows:


Carrying amount Fair value Amount of difference

(1) Cash and deposits 1,667,713 1,667,713 -

(2) Cash and deposits in trust 3,153,262 3,153,262 -

(3) Investment securities 734,500 734,500 -

Assets total 5,555,476 5,555,476 -

(4) Current portion of long-term loans

payable 7,300,000 7,300,000 -

(5) Long-term loans payable 30,050,000 30,050,000 -

Liabilities total 37,350,000 37,350,000 -

(6) Derivative transactions (*) 36,966 36,966 -

The carrying amount and fair value as of July 31, 2018, and the amount of difference between these, are as follows:


Carrying amount Fair value Amount of difference

(1) Cash and deposits 2,000,005 2,000,005 -

(2) Cash and deposits in trust 3,118,735 3,118,735 -

(3) Investment securities 734,500 734,500 -

Assets total 5,853,241 5,853,241 -

(4) Current portion of long-term loans

payable 8,490,000 8,490,000 -

(5) Long-term loans payable 34,740,000 34,740,000 -

Liabilities total 43,230,000 43,230,000 -

(6) Derivative transactions (*) 35,889 35,889 -

(*) Assets and liabilities arising from derivative transactions are offset and presented in the net amount, with the balance shown in parentheses ( )

when in a net liability position.

－ 15 －

(Note 1) Method of calculation of the fair value of financial instruments

(1) Cash and deposits; (2) Cash and deposits in trust; (4) Current portion of long-term loans payable

Because these are settled in a short period of time, the fair value is approximately the same as the book value and thus stated at that book

value.

(3) Investment securities

Because interest income etc. from mezzanine loan debt are based on floating interest rates, the fair value is approximately the same as the

book value and thus stated at that book value.

(5) Long-term loans payables

Because long-term loans payable are all with floating interest rates under terms and conditions that interest rates be reviewed every set period

of time, the fair value is approximately the same as the book value and thus stated at that book value.

(6) Derivative transactions

Please refer to “Notes on Derivative Transactions” later in this document.

(Note 2) Financial instruments for which estimation of fair value is recognized to be difficult


Category 4th fiscal period

As of January 31, 2018 5th fiscal period

As of July 31, 2018

Tenant leasehold and security deposits in trust 1,794,980 1,959,368

Tenant leasehold and security deposits in trust are not subject to valuation at fair value, because a reasonable estimation of cash flows is

recognized to be extremely difficult due to there being no market price and difficulty of calculating the actual deposit period from when lessees

move in to when they move out.

(Note 3) Amount of redemption of monetary claims scheduled to be due after the date of settlement of accounts

(January 31, 2018)


Not later than 1 year

Later than 1 year and not later than

2 years

Later than 2 years and not later than

3 years


4 years


5 years Later than 5 years

Cash and deposits 1,667,713 - - - - -

Cash and deposits in trust 3,153,262 - - - - -

Investment securities - - - - - 734,500

Total 4,820,976 - - - - 734,500

(July 31, 2018)




2 years


3 years


4 years



Cash and deposits 2,000,005 - - - - -

Cash and deposits in trust 3,118,735 - - - - -

Investment securities - - - - - 734,500

Total 5,118,741 - - - - 734,500

(Note 4) Amount of repayment of loans scheduled to be due after the date of settlement of accounts

(January 31, 2018)




2 years


3 years


4 years



Long-term loans payable 7,300,000 7,300,000 11,300,000 7,300,000 4,150,000 -

Total 7,300,000 7,300,000 11,300,000 7,300,000 4,150,000 -

(July 31, 2018)


Not later than

1 year


2 years


3 years


4 years



Long-term loans payable 8,490,000 7,300,000 11,300,000 11,450,000 4,690,000 -

Total 8,490,000 7,300,000 11,300,000 11,450,000 4,690,000 -

－ 16 －

[Notes on Securities]

Other securities

4th fiscal period (as of January 31, 2018)

（Unit: Thousand yen）

Category Book value Acquisition cost Difference

Book value greater

than acquisition cost

(1)Stock - - -

(2)Bond

①Government

bond, municipal

bond, etc.

- - -

②Corporate bond - - -

③Other - - -

(3)Other - - -

Subtotal - - -

Book value less than

or equal to

acquisition cost

(1)Stock - - -

(2)Bond

①Government

bond, municipal

bond, etc.

- - -

②Corporate bond 400,000 400,000 -

③Other - - -

(3)Other 334,500 334,500 -

Subtotal 734,500 734,500 -

Total 734,500 734,500 -

5th fiscal period (as of July 31, 2018)


Category Book value Acquisition cost Difference

Book value greater

than acquisition cost

(1)Stock - - -

(2)Bond

①Government

bond, municipal

bond, etc.

- - -

②Corporate bond - - -

③Other - - -

(3)Other - - -

Subtotal - - -

Book value less than

or equal to

acquisition cost

(1)Stock - - -

(2)Bond

①Government

bond, municipal

bond, etc.

- - -

②Corporate bond 400,000 400,000 -

③Other - - -

(3)Other 334,500 334,500 -

Subtotal 734,500 734,500 -

Total 734,500 734,500 -

－ 17 －

[Notes on Derivative Transactions]


1. Derivative transactions to which hedge accounting is not applied

Not applicable.

2. Derivative transactions to which hedge accounting is applied

The following is the contract amount or the amount equivalent to the principal provided in the contract as of the date of

settlement of accounts for each hedge accounting approach.


Hedge accounting approach

Type, etc. of derivative transaction Main

hedged item

Contract amount, etc. (Note 1) Fair value (Note 2)

Of which,

later than 1 year

Principle

accounting

Interest rate swap transaction

(floating receivable; fixed payable)

Long-term

loans payable 30,050,000 30,050,000 36,966

(Note 1) Contract amount, etc. is based on notional principal.

(Note 2) Fair value is calculated based on the price quoted by lending financial institutions, etc.


1. Derivative transactions to which hedge accounting is not applied

Not applicable.

2. Derivative transactions to which hedge accounting is applied

The following is the contract amount or the amount equivalent to the principal provided in the contract as of the date of

settlement of accounts for each hedge accounting approach.


Hedge accounting approach

Type, etc. of derivative transaction Main

hedged item

Contract amount, etc. (Note 1) Fair value (Note 2)

Of which,

later than 1 year

Principle

accounting

Interest rate swap transaction

(floating receivable; fixed payable)

Long-term

loans payable 34,740,000 27,440,000 35,889

(Note 1) Contract amount, etc. is based on notional principal.

(Note 2) Fair value is calculated based on the price quoted by lending financial institutions, etc.

[Notes on Retirement Benefits]


Not applicable.


Not applicable.

[Notes on Tax-Effect Accounting]

1. Breakdown of main causes for occurrence of deferred tax assets and deferred tax liabilities


4th fiscal period


As of July 31, 2018

Deferred tax assets

Non-deductible accrued enterprise tax 6,119 -

Acquisition cost of securities 1,364 1,364

Subtotal 7,484 1,364

Valuation allowance (7,484) (1,364)

Total - -

Deferred tax assets, net - -

－ 18 －

2. Breakdown of major components that caused any significant differences between the statutory tax rate and the effective

income tax rate after application of tax-effect accounting

(Unit: %)

4th fiscal period


As of July 31, 2018

Statutory tax rate 31.74 31.74

[Adjustments]

Deductible distributions payable (28.57) (31.30)

Other 0.79 (0.40)

Effective income tax rate

after application of tax-effect accounting 3.96 0.05

[Notes on Share of Profit (Loss) of Entities Accounted for Using Equity Method, etc.]


Not applicable.


Not applicable.

[Notes on Related-Party Transactions]

1. Parent company, major corporate unitholder, etc.

4th fiscal period (from August 1, 2017 to January 31, 2018)

Not applicable.

5th fiscal period (from February 1, 2018 to July 31, 2018)

Not applicable.

2. Affiliated company, etc.


Not applicable.


Not applicable.

3. Fellow subsidiary, etc.


Not applicable.


Not applicable.

－ 19 －

4. Director, major individual unitholder, etc.


Type

Name of

company,

etc. or

person

Address

Capital stock

or

investments

in capital

Description

of business

or

occupation

Percentage

of voting

rights, etc.

held by (in)

SAR

Description of

transaction

Transaction

amount

(thousand

yen)

Account

item

Balance at

end of

period

(thousand

yen)

Director,

or close

relative

of

director

Atsushi

Kato －－

Executive

Director of

SAR, and

President

and CEO of

the Asset

Management

Company

0.01%

Payment of

asset

management

fee to the

Asset

Management

Company

(Note 1)

237,214

(Note 2)

(Note 3)

Accounts

payable -

other

220,609

(Note 2)


Type

Name of

company,

etc. or

person

Address

Capital stock

or

investments

in capital

Description

of business

or

occupation

Percentage

of voting

rights, etc.

held by (in)

SAR

Description of

transaction

Transaction

amount

(thousand

yen)

Account

item

Balance at

end of

period

(thousand

yen)

Director,

or close

relative

of

director

Atsushi

Kato －－

Executive

Director of

SAR, and

President

and CEO of

the Asset

Management

Company

0.01%

Payment of

asset

management

fee to the

Asset

Management

Company

(Note 1)

247,034

(Note 2)

(Note 3)

Accounts

payable -

other

208,785

(Note 2)

(Note 1) The transaction is one that was conducted by Atsushi Kato as President and CEO of a third party (the Asset Management Company), and

the transaction amount is based on the terms and conditions provided in the Articles of Incorporation of SAR.

(Note 2) Of the amounts above, the transaction amount does not include consumption tax, while the balance at the end of the period includes

consumption tax.

(Note 3) Asset management fee of 4th fiscal period includes the property transfer incentive portion in the amount of 25,602 thousand yen. Asset

management fee of 5th fiscal period includes the property acquisition incentive portion included in the book value of individual real

estate, etc. in the amount of 53,715 thousand yen.

[Notes on Asset Retirement Obligations]


Not applicable.


Not applicable.

－ 20 －

[Notes on Investment and Rental Properties]

SAR owns rental real estate, etc. for the purpose of earning revenue from leasing. The carrying amount, amount of increase

(decrease) during the period and fair value of these investment and rental properties are as follows:


4th fiscal period



To: July 31, 2018

Carrying amount

Balance at beginning of period 78,156,438 76,289,122

Amount of increase (decrease) during period (1,867,315) 10,819,546

Balance at end of period 76,289,122 87,108,669

Fair value at end of period 82,680,000 95,246,000

(Note 1) Carrying amount is the amount of the cost of acquisition, less accumulated depreciation. (Note 2) Of the amount of increase (decrease) in investment and rental properties during 4th period, the amount of increase is mainly attributable to

capital expenditure (182,811 thousand yen), while the amount of decrease is mainly attributable to disposition of real estate beneficiary

interest in trust of 1 property (51% of quasi co-ownership) (1,744,836 thousand yen) and depreciation (305,290 thousand yen). Of the amount

of increase (decrease) in investment and rental properties during 5th period, the amount of increase is mainly attributable to acquisition of

real estate beneficiary interest in trust of 6 properties (10,894,174 thousand yen) and capital expenditure (281,180 thousand yen), while the

amount of decrease is mainly attributable to depreciation (355,808 thousand yen).

(Note 3) Fair value at the end of the period is the appraisal value by an outside real estate appraiser. Of the fair value at the end 5th period, that of

Hakata-eki Higashi 113 Building is based of transfer price (2,850,000 thousand yen) stated in the contract dated July 23, 2018 and that of Urban

Park Shin-Yokohama is based of transfer price (2,775,000 thousand yen) stated in the contract dated August 21, 2018.

The income (loss) concerning investment and rental properties are as stated in “Notes to the Statement of Income” earlier in this

document.

[Notes on Segment Information]

1. Segment information

Segment information is omitted because SAR operates a single segment, which is the real estate leasing business.

2. Related information


(1) Information about products and services

Information about products and services is omitted because net sales to external customers for a single products and

services category are in excess of 90% of operating revenue on the statement of income.

(2) Information about geographic areas

① Net sales

Information about net sales is omitted because net sales to external customers in Japan are in excess of 90% of

operating revenue on the statement of income.

② Property, plant and equipment

Information about property, plant and equipment is omitted because the amount of property, plant and equipment

located in Japan is in excess of 90% of the amount of property, plant and equipment on the balance sheet.

(3) Information about major customers


Customer name Operating revenue Segment

Kanden Realty & Development Co., Ltd. 771,663 Real estate leasing business.

－ 21 －


(1) Information about products and services

Information about products and services is omitted because net sales to external customers for a single products and

services category are in excess of 90% of operating revenue on the statement of income.

(2) Information about geographic areas

① Net sales

Information about net sales is omitted because net sales to external customers in Japan are in excess of 90% of


② Property, plant and equipment

Information about property, plant and equipment is omitted because the amount of property, plant and equipment

located in Japan is in excess of 90% of the amount of property, plant and equipment on the balance sheet.

(3) Information about major customers

Information about major customers is omitted because operating revenue to each customer is less than 10% of


[Notes on Per Unit Information]

4th fiscal period



To: July 31, 2018

Net assets per unit 101,063 yen 100,477 yen

Net income per unit 4,349 yen 2,775 yen

(Note 1) Net income per unit is calculated by dividing net income by the daily weighted average number of investment units. In addition, diluted net income

per unit is not stated, because there are no diluted investment units.

(Note 2) The basis for calculation of net income per unit is as follows:

4th fiscal period



To: July 31, 2018

Net income (thousand yen) 1,802,173 1,305,316

Amount not attributable to common unitholders

(thousand yen) - -

Net income attributable to common investment units

(thousand yen) 1,802,173 1,305,316

Average number of investment units during period (units) 414,300 470,238

－ 22 －

[Notes on Significant Subsequent Events]

1. Issuance of new investment units

SAR resolved the issuance of new investment units for the purpose of procuring funds for acquisition of new properties and

repayment of borrowings at the Board of Directors meetings on August 21, 2018 and August 29, 2018 as follows. For the

issuance of new investment units through public offering, the payment was completed on September 5, 2018.

<Issuance of new investment units through public offering>

Number of new investment units issued: 66,857 units

Offer price: 101,985 yen per unit

Total offer price: 6,818,411,145 yen

Paid-in amount (issue amount): 98,480 yen per unit

Total paid-in amount (total issue amount): 6,584,077,360 yen

Payment date: September 5, 2018

<Issuance of new investment units through third-party allotment>

Number of new investment units issued: up to 3,343 units

Paid-in amount (issue amount): 98,480 yen per unit

Total paid-in amount (total issue amount): up to 329,218,640 yen

Payment Date: October 2, 2018

Allottee: Nomura Securities Co. Ltd.

SAR acquired real estate beneficiary interest in trust of 6 properties (total amount of purchase price: 19,670 million yen) on

September 6, 2018, allocating the funds from issuance of new investment units through public offering as part of acquisition

funds.

2. Asset transfer

SAR decided asset transfer as follows.

<Hakata-eki Higashi 113 Building>

Asset to be transferred: Beneficiary interest in real estate in Japan

Contract date: July 23, 2018

Planned transfer date:

1st (49% quasi-co-ownership interest) December 3, 2018

2nd (51% quasi-co-ownership interest) February 1, 2019

Location (indication of residential address): 1-13-9 Hakataeki-Higashi, Hakata-ku, Fukuoka-shi, Fukuoka

Buyer: Godo-Kaisha Sunrise

Transfer price:

1st (49% quasi-co-ownership interest) 1,396.5 million yen

2nd (51% quasi-co-ownership interest) 1,453.5 million yen

Effect on income (loss): Approximately 401million yen of gain on sales of real estate property will be recorded as operating

revenue in the fiscal period ended January 31, 2019 and approximately 418million yen of gain on

sales of real estate property will be recorded as operating revenue in the fiscal period ended July 31,

2019.

<Urban Park Shin-Yokohama>

Asset to be transferred: Beneficiary interest for real estate in Japan

Contract date: August 21, 2018

Planned transfer date: October 11, 2018

Location (indication of residential address): 2-18-5 Shin-Yokohama, Kohoku-ku, Yokohama-shi, Kanagawa

Buyer: Kyushu Railway Company

Transfer price: 2,775 million yen

Effect on income (loss): Approximately 177million yen of gain on sales of real estate property will be recorded as operating

revenue in the fiscal period ended January 31, 2019.

－ 23 －

(9) Changes in Total Number of Investment Units Issued and Outstanding

The following are the changes in unitholders’ capital and total number of investment units issued and outstanding from the date

of establishment of SAR to the end of 5th fiscal period.

Date Event

Total number of investment units issued and outstanding

(units)

Unitholders’ capital (thousand yen)

(Note 9) Remarks

Increase (Decrease)

Balance Increase

(Decrease) Balance

December 1, 2015 Establishment through

private placement 2,000 2,000 200,000 200,000 (Note 1)

January 14, 2016 Capital increase through

private placement 95,000 97,000 9,500,000 9,700,000 (Note 2)

April 19, 2016 Capital increase through

public offering 235,900 332,900 22,705,375 32,405,375 (Note 3)

May 17, 2016 Capital increase through

third-party allotment 11,800 344,700 1,135,750 33,541,125 (Note 4)




third-party allotment 3,400 414,300 317,043 40,031,185 (Note 6)

February 1, 2018 Capital increase through


February 27, 2018 Capital increase through

third-party allotment 2,683 470,624 276,354 45,832,670 (Note 8)

(Note 1) Investment units were issued at a paid-in amount of 100,000 yen per unit upon the establishment of SAR. (Note 2) Investment units were issued at a paid-in amount of 100,000 yen per unit.

(Note 3) New investment units were issued through public offering at an issue price of 100,000 yen (paid-in amount of 96,250 yen) per unit for the

purpose of procuring funds for acquisition of new properties, etc.

(Note 4) New investment units were issued through third-party allotment at a paid-in amount of 96,250 yen per unit for the purpose of procuring funds

for repayment of borrowings.

(Note 5) New investment units were issued through public offering at an issue price of 96,720 yen (paid-in amount of 93,248 yen) per unit for the purpose

of procuring funds for acquisition of new properties.



(Note 7) New investment units were issued through public offering at an issue price of 106,724 yen (paid-in amount of 103,002 yen) per unit for the

purpose of procuring funds for acquisition of new properties.



(Note 9) Deduction of reversal of allowance for temporary difference adjustment in line with the cash distribution in excess of earnings from unitholders’

capital is not considered.

－ 24 －

4. Changes in Directors

(1) Directors of SAR

There were no changes in directors in the fiscal period under review.

(2) Directors of the Asset Management Company

Changes in directors are disclosed in immediate release when decided.

5. Reference Information

(1) Investment Status

Type of

asset Primary use

Geographic area

(Note 1)

4th fiscal period


5th fiscal period

(As of July 31, 2018)

Total amount

held

(million yen)

(Note 2)

As a percentage

of total assets

(%)

(Note 3)

Total amount

held

(million yen)

(Note 2)

As a percentage

of total assets

(%)

(Note 3)

Real

estate

in trust

Office

Greater Tokyo 15,070 18.3 16,570 17.7

Other than Greater Tokyo 10,297 12.5 10,253 11.0

Residence

Greater Tokyo 13,845 16.9 15,033 16.1


Logistics facility Greater Tokyo 24,544 29.9 31,137 33.3

Hotel

Greater Tokyo 7,128 8.7 7,122 7.6


Subtotal 76,289 92.9 87,108 93.1

Investment securities 734 0.9 734 0.8

Deposits and other assets 5,131 6.2 5,710 6.1

Total amount of assets 82,154 100.0 93,553 100.0

Amount

(million yen)

As a percentage

of total assets

(%)

Amount

(million yen)

As a percentage

of total assets

(%)

Total amount of liabilities (Note 4) 40,284 49.0 46,266 49.5

Total amount of net assets (Note 4) 41,870 51.0 47,287 50.5

(Note 1) “Greater Tokyo” refers to Tokyo’s 23 wards, Yokohama City and Kawasaki City in the case of the office asset type, and

Tokyo, Kanagawa, Saitama and Chiba Prefectures in the case of other asset types (residence, logistics facility and hotel).

The same shall apply hereinafter.

(Note 2) “Total amount held” is the carrying amount as at the date of settlement of accounts (in the case of real estate in trust,

then the depreciated book value), rounded down to the nearest million yen.

(Note 3) “As a percentage of total assets” is the carrying amount of the concerned assets expressed as a percentage of the total

amount of assets, rounded to the first decimal place.

(Note 4) “Total amount of liabilities” and “Total amount of net assets” are according to total liabilities and total net assets on

the balance sheet.

－ 25 －

(2) Invested Assets

① Investment securities

Asset

no. Name of the security Type of asset

Quantity

(Units)

Book value (million

yen)

Fair value

(million yen)

(Note 1)

Unrealized

gain or

loss

(Million

yen)

Remarks

Unit

price Amount

Unit

price Amount

MEZ-01

Star Asia Mezzanine Loan

Debt Investment Series 1

(Note 2)

Corporate

bond －－ 400 － 400 －－

MEZ-02

Star Asia Mezzanine Loan

Debt Investment Series 2

(Note 3)

Trust

beneficiary

rights

－－ 334 － 334 －－

Total －－－ 734 － 734 －－

(Note 1) Because interest income etc. from mezzanine loan debt are based on floating interest rates, the fair value is

approximately the same as the book value and thus stated at that book value.

(Note 2) The underlying assets are trust beneficiary interests in a trust mainly comprised of Relief Premium Haneda.

(Note 3) The underlying assets are trust beneficiary interests in a trust mainly comprised of Sasazuka South Building.

－ 26 －

② Real estate

(a) Overview of real estate (purchase price, etc)

Use

Property

no.

(Note 1)

Property name Location

(Note 2)

Acquisition

price

(million yen)

(Note 3)

Share of

investment

(%)

(Note 4)

Real estate

appraisal

value, etc.

(million yen)

(Note 5)

Acquisition date

Off

ice

OFC-01 Minami-Azabu Shibuya

Building

Minato Ward,

Tokyo 2,973 3.5 3,150 January 14, 2016

OFC-03 Honmachibashi Tower Chuo Ward,

Osaka City, Osaka 6,065 7.0 6,940 January 14, 2016

OFC-04 Nishi-Shinjuku Matsuya

Building

Shibuya Ward,

Tokyo 1,763 2.0 2,430 April 20, 2016

OFC-05 Alphabet Seven Minato Ward,

Tokyo 1,725 2.0 2,390 April 20, 2016

OFC-06 Shibuya MK Building Shibuya Ward,

Tokyo 2,042 2.4 2,890 April 20, 2016

OFC-07 Hakata-eki Higashi 113

Building

Hakata Ward,

Fukuoka City,

Fukuoka

1,885 2.2 2,090 April 20, 2016

OFC-08 Asahi Building

Kanagawa Ward,

Yokohama City,

Kanagawa

6,320 7.3 7,090 April 20, 2016

OFC-09 Hakata-eki East Place

Hakata Ward,

Fukuoka City,

Fukuoka

2,286 2.7 2,480 April 6, 2017

OFC-10 Nihonbashi Hamacho Park

Building Chuo Ward, Tokyo 1,450 1.7 1,520 February 2, 2018

Subtotal 26,509 30.8 30,980 －

Res

iden

ce

RSC-01 Urban Park Azabujuban Minato Ward,

Tokyo 2,045 2.4 2,230 January 14, 2016

RSC-02 Urban Park Daikanyama Shibuya Ward,

Tokyo 6,315 7.3 7,500 January 14, 2016

RSC-04 Urban Park Shin-Yokohama

Kohoku Ward,

Yokohama City,

Kanagawa

2,528 2.9 2,580 April 20, 2016

RSC-05 Urban Park Namba Naniwa Ward,

Osaka City, Osaka 1,490 1.7 1,610 April 20, 2016

RSC-06 Urban Park Gokokuji Toshima Ward,

Tokyo 1,460 1.7 1,510 February 1, 2017

RSC-07 Urban Park Kashiwa Kashiwa City,

Chiba 1,186 1.4 1,190 April 6, 2017

RSC-08 Urban Park Ryokuchi Koen Suita, Osaka 1,550 1.8 1,570 February 2, 2018

RSC-09 Urban Park Koenji Suginami Ward,

Tokyo 1,167 1.4 1,170 February 2, 2018

Subtotal 17,741 20.6 19,360 －

－ 27 －

Logi

stic

s fa

cilit

y

LGC-01 Iwatsuki Logistics

Iwatsuki Ward,

Saitama City,

Saitama

6,942 8.1 7,140 January 14, 2016

LGC-02 Yokohama Logistics

Kanagawa Ward,

Yokohama City,

Kanagawa

3,560 4.1 4,060 January 14, 2016

LGC-03 Funabashi Logistics Funabashi City,

Chiba 7,875 9.1 8,650 January 14, 2016

LGC-04 Baraki Logistics Ichikawa City,

Chiba 4,700 5.5 4,930 April 6, 2017

LGC-05 Tokorozawa Logistics Tokorozawa City,

Saitama 1,300 1.5 1,350 April 6, 2017

LGC-06 Funabashi Nishiura

Logistics I Funabashi, Chiba 3,000 3.5 3,020 February 2, 2018

LGC-07 Funabashi Nishiura

Logistics II Funabashi, Chiba 821 1.0 841 February 2, 2018

LGC-08 Matsubushi Logistics Kitakatsushika,

Saitama 2,755 3.2 2,850 February 2, 2018

Subtotal 30,953 36.0 32,841 －

Ho

tel

HTL-01 R&B Hotel Umeda East Kita Ward,


HTL-02 Smile Hotel Namba Naniwa Ward,


HTL-03 BEST WESTERN Tokyo

Nishikasai

Edogawa Ward,

Tokyo 3,827 4.4 3,830 April 6, 2017

HTL-04 BEST WESTERN Yokohama

Tsurumi Ward,

Yokohama City,

Kanagawa

3,248 3.8 3,250 April 6, 2017

Subtotal 10,894 12.7 11,110 －

Total 86,097 100.0 94,291 －

(Note 1) “Property no.” is that assigned to SAR’s investment assets by categorizing into office (OFC), retail facility (RTL), residence (RSC), logistics

facility (LGC) and hotel (HTL), and numbering in order by category. The same shall apply hereinafter.

(Note 2) “Location” is the smallest independent administrative district in which each investment asset is located.

(Note 3) “Acquisition price” indicates, with the exception of Minami-Azabu Shibuya Building, the sale and purchase price stated in the sale and

purchase agreement for the investment asset. The sale and purchase price do not include consumption tax and local consumption tax.

However, in the case of Minami-Azabu Shibuya Building, since the price for each investment asset is not set in the sale and purchase

agreement, the total sale and purchase price is divided proportionally based on the ratio of the appraisal value of the properties at the time

of acquisition and indicated as the acquisition price.

(Note 4) “Share of investment” is the acquisition price of the investment asset expressed as a percentage of the sum total amount of acquisition price,

rounded to the first decimal place.

(Note 5) Appraisals are entrusted to Daiwa Real Estate Appraisal Co., Ltd., Japan Real Estate Institute and The Tanizawa Sogo Appraisal co., Ltd. and

real estate appraisal values are the opinions of value stated in the real estate appraisal report with July 31, 2018 as the date of value, each

rounded to the nearest million yen. For details, please refer to “ (d) Summary of appraisal report.”

－ 28 －

(b) Portfolio Summary

a. By Geographic Area

Geographic area Acquisition price

(million yen)

Share

(%)

(Note 1)

Greater

Tokyo

5 central wards of Tokyo (Note 2) 18,313 21.3 80.1

Other areas in Greater Tokyo 50,689 58.9

Other than Greater Tokyo 17,095 19.9

Total 86,097 100.0

(Note 1) “Share” is calculated on an acquisition price basis, rounded to the first decimal place. Accordingly, the shares may

not add up to 100%. The same shall apply hereinafter in “c. By Asset Type (Use).”

(Note 2) “5 central wards of Tokyo” refers to Chiyoda, Chuo, Minato, Shinjuku and Shibuya Wards. The same shall apply

hereinafter.

(a) Office


(million yen)

Share

(%)

Greater

Tokyo

5 central wards of Tokyo 9,953 37.5 61.4



Total 26,509 100.0

(b) Residence


(million yen)

Share

(%)

Greater

Tokyo

5 central wards of Tokyo 8,360 47.1 82.9



Total 17,741 100.0

(c) Logistics facility


(million yen)

Share

(%)

Greater

Tokyo

5 central wards of Tokyo －－ 100.0


Other than Greater Tokyo －－

Total 30,953 100.0

－ 29 －

(d) Hotel


(million yen)

Share

(%)

Greater

Tokyo

5 central wards of Tokyo －－ 64.9



Total 10,894 100.0

b. By Size

Acquisition price Number of

properties

Share

(%)

(Note)

5 billion yen or more

but less than 10 billion yen 5 17.2

1 billion yen or more

but less than 5 billion yen 23 79.3

Less than 1 billion yen 1 3.4

Total 29 100.0

(Note) “Share” is calculated on a number of properties basis.

c. By Asset Type (Use)

Use Number of

properties

Acquisition price

(million yen)

Share

(%)

Office 9 26,509 30.8

Residence 8 17,741 20.6

Logistics facility 8 30,953 36.0

Hotel 4 10,894 12.7

Total 29 86,097 100.0

－ 30 －

(c) Status of Leasing

Property

no. Property name

Construction

completion

Number of

tenants

(Note 1)

Operating

revenue

from leasing

(thousand

yen)

(Note 2)

Security and

guarantee

deposits

(thousand

yen)

(Note 3)

Leased area

(m2)

(Note 4)

Leasable area

(m2)

(Note 5)

Occupancy

rate

(%)

(Note 6)

OFC-01 Minami-Azabu Shibuya

Building June 1993 5 94,929 110,427 3,263.08 3,263.08 100.0

OFC-03 Honmachibashi Tower February 2010 5

(Note 7) 216,674 198,451 10,489.58 10,489.58 100.0

OFC-04 Nishi-Shinjuku Matsuya

Building May 1987 10 98,436 110,056 3,521.03 3,521.03 100.0

OFC-05 Alphabet Seven January 1990 9 75,406 95,075 2,464.59 2,464.59 100.0

OFC-06 Shibuya MK Building July 1993 4 75,392 99,047 1,612.88 1,612.88 100.0

OFC-07 Hakata-eki Higashi 113

Building October 1987 34 75,784 96,904 3,596.71 3,596.71 100.0

OFC-08 Asahi Building November 1994 21 218,872 267,533 8,672.01 8,672.01 100.0

OFC-09 Hakata-eki East Place February 1986 17 100,791 62,367 4,067.77 4,632.70 87.8


Building July 1992 3 45,084 83,364 1,911.84 1,911.84 100.0

RSC-01 Urban Park Azabujuban November 1999 43 54,003 11,409 1,956.15 1,986.76 98.5

RSC-02 Urban Park Daikanyama ① November 1982

② May 2006 65 189,587 81,835 5,632.33 5,977.18 94.2

RSC-04 Urban Park Shin-Yokohama May 2009 68 76,112 16,779 3,924.20 3,989.11 98.4

RSC-05 Urban Park Namba January 2013 114 51,932 100 2,521.45 2,584.81 97.5

RSC-06 Urban Park Gokokuji February 1990 107 51,645 8,651 1,947.66 1,964.04 99.2

RSC-07 Urban Park Kashiwa August 1997 39 36,332 8,037 2,743.68 2,954.77 92.9

RSC-08 Urban Park Ryokuchi Koen March 1989 53 54,661 8,186 4,783.38 5,508.94 86.8

RSC-09 Urban Park Koenji October 1987 72 35,241 5,854 1,252.73 1,365.48 91.7

LGC-01 Iwatsuki Logistics October 2014 3 200,802 97,014 30,190.81 30,190.81 100.0

LGC-02 Yokohama Logistics October 1994 1

Not

disclosed

(Note 9)

Not

disclosed

(Note 9)

Not

disclosed

(Note 9)

18,142.08 100.0

LGC-03 Funabashi Logistics

Building 1:

September 1992

Building 2:

August 1997

4 255,664 83,426 34,901.67 38,086.56 91.6

LGC-04 Baraki Logistics August 2015 2

Not

disclosed

(Note 9)

Not

disclosed

(Note 9)

Not

disclosed

(Note 9)

12,185.78 100.0

－ 31 －

LGC-05 Tokorozawa Logistics April 1999 1

Not

disclosed

(Note 9)

Not

disclosed

(Note 9)

Not

disclosed

(Note 9)

5,994.75 100.0

LGC-06 Funabashi Nishiura Logistics I October 1985 1

Not

disclosed

(Note 9)

Not

disclosed

(Note 9)

Not

disclosed

(Note 9)

14,018.82 100.0

LGC-07 Funabashi Nishiura Logistics

II

Warehouse: March

1991

Factory: May 1972

Office: May 1986

1

Not

disclosed

(Note 9)

Not

disclosed

(Note 9)

Not

disclosed

(Note 9)

6,315.87 100.0

LGC-08 Matsubushi Logistics March 1997 1

Not

disclosed

(Note 9)

Not

disclosed

(Note 9)

Not

disclosed

(Note 9)

19,833.47 100.0

HTL-01 R&B Hotel Umeda East October 2000 1 65,572 73,615 3,940.93 3,940.93 100.0

HTL-02 Smile Hotel Namba February 2008 1 43,197 - 1,711.42 1,711.42 100.0


Nishikasai March 1991 1 98,829 84,600 5,293.88 5,293.88 100.0

HTL-04 BEST WESTERN Yokohama September 1987 1 80,393 80,400 4,686.09 4,686.09 100.0

Total (29 properties) 687 2,791,975 1,959,368 221,576.64 226,895.97 97.7

(Note 1) “Number of tenants” is the number of tenants (excluding parking) under the lease agreement stated in the lease

agreement for the investment asset as of July 31, 2018. If a single tenant is leasing multiple rental units in an

investment asset, the tenant is counted as 1 tenant for the concerned investment asset. If a single tenant is leasing

rental units across multiple investment assets, the tenant is counted as separate tenants and the sum total number

of tenants is stated in the total column. Furthermore, in cases where a pass-through type master lease agreement

under which rent from end-tenants is received as is in principle (“pass-through type master lease”) has been

concluded for the concerned investment asset, the total number of end-tenants is stated. In cases where a master

lease agreement agreeing to the effect that the rent under the master lease agreement shall be a fixed rent (“rent-

guaranteed type master lease”) has been concluded for the concerned investment asset, the number of tenants is 1

and the sum total of these is stated.

(Note 2) “Operating revenue from leasing” is rental revenue, common area maintenance revenue, parking revenue and other

revenue from real estate held generated during the fiscal period under review (including other lease business

revenue).

(Note 3) “Security and guarantee deposits” is the sum total amount of tenant security and guarantee deposits required based

on the lease agreement (including deposits based on parking, antenna, rooftop and other agreements; the amount

after depreciation) for the investment asset as of July 31, 2018 (limited to those occupied as of said date).

Furthermore, in cases where a pass-through type master lease agreement has been concluded for the concerned

investment asset, it is the sum total amount of tenant security and guarantee deposits under lease agreements

concluded with end-tenants.

(Note 4) “Leased area” is the sum total of the leased area stated in the lease agreement for the investment asset as of July

31, 2018. Furthermore, in cases where a master lease agreement has been concluded for the concerned investment

asset, it is the sum total of the leased area under lease agreements concluded with end-tenants for properties under

a pass-through type master lease, and it is the leased area under the master lease agreement for properties under

a rent-guaranteed type master lease.

(Note 5) “Leasable area” is the floor area regarded as being available for leasing based on the lease agreement or building

drawing, etc. of the building for the investment asset as of July 31, 2018.

(Note 6) “Occupancy rate” is the ratio of leased area to leasable area for the investment asset as of July 31, 2018, rounded to

the first decimal place. In addition, in the total column, it is the ratio of the sum total of leased area to the sum total

of leasable area for the investment asset, rounded to the first decimal place.

(Note 7) Of the tenants of the property, a single company leases all 36 units of the residential portion, of which 30 units are

under a rent-guaranteed type master lease agreement and 6 units are under a pass-through type master lease

－ 32 －

agreement.

(Note 8) In the table, “Number of tenants,” “Security and guarantee deposits,” “Leased area” and “Occupancy rate” are based

on lease agreements valid as of July 31, 2018, even if there is a notice of cancellation or termination of lease

agreements with end-tenants or unpaid rent.

(Note 9) Not disclosed, because consent for disclosure has not been obtained from the tenants.

(d) Summary of Real Estate Appraisal Report, etc.

Use Property

no. Property name

Appraisal

firm

(Note 1)

Appraisal

value

(million yen)

(Note 2)

Summary of appraisal report

Appraisal

NOI yield

(%)

(Note 4)

Income approach

NOI

(million yen)

(Note 3)

Direct capitalization

method

DCF

method

Indicated

value

(million yen)

Cap rate

(%)

Indicated

value

(million yen)

Discount

rate

(%)

Terminal

cap rate

(%)

Office

OFC-01 Minami-Azabu Shibuya Building Daiwa 3,150 3,250 4.0 3,100 3.6 4.2 145 4.9

OFC-03 Honmachibashi Tower Daiwa 6,940 7,110 4.2 6,870 4.0 4.4 312 5.2

OFC-04 Nishi-Shinjuku Matsuya Building Daiwa 2,430 2,430 4.1 2,430 3.9 4.3 112 6.4

OFC-05 Alphabet Seven JREI 2,390 2,430 4.0 2,350 3.8 4.2 101 5.9

OFC-06 Shibuya MK Building JREI 2,890 2,940 3.8 2,830 3.6 4.0 115 5.6

OFC-07 Hakata-eki Higashi 113 Building Daiwa 2,090 2,170 4.6 2,060 4.4 4.8 111 5.9

OFC-08 Asahi Building JREI 7,090 7,130 3.9 7,050 3.6 4.0 308 4.9

OFC-09 Hakata-eki East Place Daiwa 2,480 2,520 4.7 2,460 4.5 4.9 119 5.2


Building Daiwa 1,520 1,550 4.3 1,510 4.1 4.5 68 4.7

Subtotal 30,980 31,530 - 30,660 - - 1,393 5.3

Residence

RSC-01 Urban Park Azabujuban JREI 2,230 2,260 3.9 2,190 3.7 4.1 91 4.4

RSC-02 Urban Park Daikanyama JREI 7,500 7,640 3.8 7,360 3.6 4.0 302 4.8

RSC-04 Urban Park Shin-Yokohama Daiwa 2,580 2,610 4.5 2,560 4.3 4.7 121 4.8

RSC-05 Urban Park Namba Daiwa 1,610 1,630 4.8 1,600 4.6 5.0 80 5.4

RSC-06 Urban Park Gokokuji JREI 1,510 1,530 4.3 1,480 4.1 4.5 73 5.0

RSC-07 Urban Park Kashiwa Tanizawa 1,190 1,220 4.6 1,170 4.7 4.8 60 5.0

RSC-08 Urban Park Ryokuchi Koen Tanizawa 1,570 1,590 4.9 1,560 5.0 5.1 88 5.7

RSC-09 Urban Park Koenji Tanizawa 1,170 1,200 4.1 1,160 4.2 4.3 56 4.8

Subtotal 19,360 19,680 - 19,080 - - 872 4.9

Logistics

facility

LGC-01 Iwatsuki Logistics Daiwa 7,140 7,250 4.5 7,090 4.3 4.7 333 4.8

LGC-02 Yokohama Logistics Daiwa 4,060 4,120 4.3 4,030 4.1 4.5 205 5.8

LGC-03 Funabashi Logistics Daiwa 8,650 8,760 4.3 8,600 4.1 4.5 429 5.5

LGC-04 Baraki Logistics Tanizawa 4,930 5,050 4.1 4,880 4.0 4.3 209 4.4

LGC-05 Tokorozawa Logistics JREI 1,350 1,350 5.1 1,340 4.7 5.4 74 5.7

LGC-06 Funabashi Nishiura Logistics I Daiwa 3,020 3,060 4.6 3,000 4.4 4.8 154 5.1

LGC-07 Funabashi Nishiura Logistics II Daiwa 841 837 5.7 843 5.5 5.9 58 7.1

LGC-08 Matsubushi Logistics JREI 2,850 2,870 5.1 2,830 4.6 5.4 151 5.5

Subtotal 32,841 33,297 - 32,613 - - 1,612 5.2

Hotel

HTL-01 R&B Hotel Umeda East Daiwa 2,310 2,330 4.6 2,300 4.4 4.8 115 5.6

HTL-02 Smile Hotel Namba Daiwa 1,720 1,740 5.1 1,710 4.9 5.3 98 5.6


Nishikasai JREI 3,830 3,890 4.5 3,770 4.3 4.7 182 4.8

HTL-04 BEST WESTERN Yokohama JREI 3,250 3,260 4.6 3,230 4.3 4.7 155 4.8

Subtotal 11,110 11,220 - 11,010 - - 550 5.0

Total 94,291 95,727 - 93,363 - - 4,427 5.1

－ 33 －

(Note 1) “Appraisal firm” is shown as “Daiwa” to stand for Daiwa Real Estate Appraisal Co., Ltd., “JREI” to stand for Japan Real

Estate Institute and “Tanizawa” to stand for The Tanizawa Sogo Appraisal co., Ltd.

(Note 2) “Appraisal value” is as of July 31, 2018 as the date of value.

(Note 3) “NOI” is the net operating income by the direct capitalization method stated in the appraisal report, rounded to the

nearest million yen.

(Note 4) “Appraisal NOI yield” is based on the net operating income by the direct capitalization method stated in the appraisal

report and expressed as a percentage of acquisition price, rounded to the first decimal place.

(e) Information on Major Real Estate Properties

Of investment assets, the following are those that fall under the category of major real estate properties (those

buildings/facilities pertaining to land recognized to be used collectively of which total rental revenue accounts for 10% or more

of the sum total of total rental revenue of investment assets) and the top five properties in terms of total rental revenue as of

July 31, 2018.

Changes in occupancy rate (%) (Note 2)

July 31, 2016 January 31, 2017 July 31, 2017 January 31, 2018 July 31, 2018

Funabashi Logistics 91.6 91.6 91.6 91.6 91.6

Asahi Building 93.3 96.4 100.0 100.0 100.0

Iwatsuki Logistics 100.0 100.0 100.0 100.0 100.0

Honmachibashi

Tower 100.0 100.0 100.0 100.0 100.0

Urban Park

Daikanyama 93.2 95.5 99.1 98.0 94.2

(Note 1) There is no property that falls under the category of major real estate properties as defined above as of July 31, 2018.

(Note 2) “Changes in occupancy rate” is the ratio of leased area to leasable area for the investment asset as of the record

date, rounded to the first decimal place.

－ 34 －

(f) Top 10 End-Tenants in Terms of Leased Area

The following table lists the tenants ranking in the top ten tenants in terms of leased area of investment assets.

Name of tenant Name of property occupied

Leased area

(m2)

(Note 1)

As a percentage of

total leasable area

(%)

(Note 2)

1 Not disclosed (Note 3) Iwatsuki Logistics Not disclosed (Note 3) 13.1

2 Not disclosed (Note 3) Funabashi Logistics Not disclosed (Note 3) 9.6

3 Tokyo Nohin Daiko Matsubushi Logistics 19,833.47 8.7

4 Not disclosed (Note 3) Yokohama Logistics Not disclosed (Note 3) 8.0

5 Not disclosed (Note 3) Funabashi Nishiura Logistics I Not disclosed (Note 3) 6.2

6 Rembrandt Inn BEST WESTERN Tokyo Nishikasai

BEST WESTERN Yokohama 9,979.97 4.4

7 Not disclosed (Note 3) Funabashi Logistics Not disclosed (Note 3) 3.2

8 Not disclosed (Note 3) Funabashi Nishiura Logistics II Not disclosed (Note 3) 2.8

9 Not disclosed (Note 3) Baraki Logistics Not disclosed (Note 3) 2.7

10 Not disclosed (Note 3) Baraki Logistics Not disclosed (Note 3) 2.7

Total of the top 10 tenants 139,181.56 61.3

(Note 1) “Leased area” is the sum total of the leased area stated in the lease agreement for the investment asset as of July

31, 2018.

(Note 2) “As a percentage of total leasable area” is the area leased to the tenant expressed as a percentage of the sum total

of leasable area of all investment assets, rounded to the first decimal place.

(Note 3) Not disclosed, because consent for disclosure has not been obtained from the end-tenants, etc.

－ 35 －

(g) Capital Expenditures

a. Schedule of Capital Expenditures for the 6th fiscal period

The following are the principal capital expenditures arising from renovation construction work, etc. currently planned

for the assets held by SAR as of July 31, 2018. Please note that the expected construction amounts include portions

that are expensed as a separate account item of accounting costs.

Name of real estate, etc. (Location)

Purpose Scheduled period

Estimated construction costs (thousand yen)

Total amount

Amount of payment

during period

Total amount already

paid

BEST WESTERN Tokyo Nishikasai

(Edogawa Ward, Tokyo)

Upgrading of automatic fire

alarm system

From: Jan. 2019

To: Feb. 2019 27,000 －－

Asahi Building

(Yokohama City, Kanagawa)

Upgrading of air-conditioning

system

From: Dec. 2018

To: Jan. 2019 20,000 －－

Shibuya MK Building

(Shibuya Ward, Tokyo)

Refurbishment of exterior

wall and front entrance eaves

From: Nov. 2018

To: Jan. 2019 17,790 －－

b. Capital Expenditures during the 5th fiscal period

The following summarizes the primary construction work that constitutes capital expenditures implemented for the

assets held by SAR as of July 31, 2018 during the 5th fiscal period. Capital expenditures for the 5th fiscal period

amounted to 281,180 thousand yen and, when combined with the 68,389 thousand yen in repair expenses charged to

the 5th fiscal period expenses, totals 349,570 thousand yen in construction work implemented.

Name of real estate, etc. (Location)

Purpose Period Construction costs

(thousand yen)

Yokohama Logistics


Expansion of air-conditioning

system on the 2nd and 3rd floor

From:Apr.2018

To: Jun.2018 82,364

Nishi-Shinjuku Matsuya

Building

(Shibuya Ward, Tokyo)

Upgrading of elevator From:Jan.2018

To: Mar.2018 20,806

Asahi Building


Conservation work of multistory

parking lot

From:Jun.2018

To: Jun.2018 20,006

Asahi Building


Upgrading of air-conditioning

system on the 1st and 5th floors

From:Mar.2018

To: Apr.2018 17,948

Others －－ 140,054

Total 281,180

－ 36 －

(h) Individual Property Income Statements


Property no. OFC-01 OFC-03 OFC-04 OFC-05 OFC-06

Property name Minami-Azabu

Shibuya Building

Honmachibashi

Tower

Nishi-Shinjuku

Matsuya Building Alphabet Seven

Shibuya

MK Building

① Total operating revenue

from real estate leasing 94,929 216,674 98,436 75,406 75,392

Lease business revenue 88,351 190,425 87,420 71,053 70,435

Other lease business revenue 6,577 26,249 11,015 4,352 4,957

② Total operating expenses


Management fee 5,707 13,860 6,549 4,916 4,819

Trust fee 398 396 396 396 346

Utilities expenses 6,793 25,070 7,251 4,333 3,288

Insurance premium 114 352 126 98 44

Repair expenses 969 582 1,520 1,205 4,825

Property taxes 4,575 19,767 3,434 6,219 4,316

Other 5,969 2,869 14,817 1,372 865

③ NOI

(①－②) 70,401 153,775 64,340 56,864 56,885

④ Depreciation 11,458 44,986 8,043 4,517 3,108

⑤ Operating income (loss)

from real estate leasing

(③－④) 58,942 108,788 56,297 52,347 53,777

⑥ Capital expenditures 2,897 2,241 22,451 2,031 10,809

⑦ NCF

(③－⑥) 67,504 151,533 41,889 54,833 46,076

Book value at end of the period 2,996,782 5,985,784 1,838,421 1,799,904 2,092,317

Property no. OFC-07 OFC-08 OFC-09 OFC-10 RSC-01

Property name Hakata-eki Higashi

113 Building Asahi Building

Hakata-eki

East Place

Nihonbashi

Hamacho Park

Building

Urban Park

Azabujuban




Other lease business revenue 5,459 16,771 19,282 - 1,465



Management fee 7,719 15,609 7,930 769 2,085

Trust fee 346 396 396 394 346

Utilities expenses 6,454 17,292 8,124 - 503


Repair expenses 1,251 6,007 4,919 63 3,021

Property taxes 5,294 15,995 6,582 0 2,784

Other 1,428 6,169 890 8,811 2,959

③ NOI

(①－②) 53,168 157,049 71,781 34,924 42,245

④ Depreciation 5,995 24,244 6,528 2,837 4,749



(③－④) 47,172 132,805 65,253 32,087 37,496

⑥ Capital expenditures 2,671 45,286 8,905 - 3,917

⑦ NCF

(③－⑥) 50,496 111,763 62,876 34,924 38,327


－ 37 －


Property no. RSC-02 RSC-04 RSC-05 RSC-06 RSC-07

Property name Urban Park

Daikanyama

Urban Park

Shin-Yokohama

Urban Park

Namba

Urban Park

Gokokuji

Urban Park

Kashiwa




Other lease business revenue 8,421 2,745 2,553 3,156 1,063



Management fee 8,594 4,771 2,566 3,852 1,851

Trust fee 346 346 346 396 346

Utilities expenses 4,630 911 482 2,589 799


Repair expenses 4,422 2,580 1,680 4,268 4,318

Property taxes 11,218 4,719 2,791 1,838 2,954

Other 5,413 6,241 4,021 8,745 779

③ NOI

(①－②) 154,767 56,393 39,980 29,901 25,198

④ Depreciation 12,233 16,442 7,515 4,332 6,763



(③－④) 142,533 39,950 32,464 25,569 18,435

⑥ Capital expenditures 243 - - 21,126 12,162

⑦ NCF

(③－⑥) 154,523 56,393 39,980 8,775 13,035


Property no. RSC-08 RSC-09 LGC-01 LGC-02 LGC-03

Property name Urban Park

Ryokuchi Koen Urban Park Koenji Iwatsuki Logistics Yokohama Logistics Funabashi Logistics


from real estate leasing 54,661 35,241 200,802

Not disclosed

(Note)

255,664

Lease business revenue 51,443 31,801 187,713 240,079

Other lease business revenue 3,217 3,439 13,088 15,585


from real estate leasing 15,070 11,599 33,799 55,782

Management fee 2,201 1,741 5,987 11,908

Trust fee 344 394 346 396

Utilities expenses 1,967 1,321 13,088 14,156

Insurance premium 116 36 271 390

Repair expenses 5,221 5,719 70 5,764

Property taxes 10 - 13,835 22,709

Other 5,208 2,387 200 455

③ NOI

(①－②) 39,590 23,641 167,002 199,882

④ Depreciation 6,864 2,416 46,467 26,695



(③－④) 32,726 21,225 120,535 173,187

⑥ Capital expenditures 5,918 - 1,955 4,744

⑦ NCF

(③－⑥) 33,672 23,641 165,046 195,138


(Note) Not disclosed, because consent for disclosure has not been obtained from the tenants.

－ 38 －


Property no. LGC-04 LGC-05 LGC-06 LGC-07 LGC-08

Property name Baraki Logistics Tokorozawa Logistics Funabashi Nishiura

Logistics I

Funabashi Nishiura

Logistics II

Matsubushi Logistics



Not disclosed

(Note)

Not disclosed

(Note)

Not disclosed

(Note)

Not disclosed

(Note)

Not disclosed

(Note)

Lease business revenue

Other lease business revenue



Management fee

Trust fee

Utilities expenses

Insurance premium

Repair expenses

Property taxes

Other

③ NOI (①－②)

④ Depreciation



(③－④)

⑥ Capital expenditures

⑦ NCF (③－⑥)

Book value at end of the period 4,706,630 1,347,537 2,970,312 839,539 2,775,416

(Note) Not disclosed, because consent for disclosure has not been obtained from the tenants.

Property no. HTL-01 HTL-02 HTL-03 HTL-04

Property name R&B Hotel Umeda East Smile Hotel

Namba (Note)

BEST WESTERN Tokyo

Nishikasai (Note)

BEST WESTERN

Yokohama



Lease business revenue 65,572 43,197 98,829 80,393

Other lease business revenue - - - -



Management fee 742 660 1,200 1,200

Trust fee 346 544 396 396

Utilities expenses 8 - - -

Insurance premium 111 53 124 105

Repair expenses 410 755 1,070 2,042

Property taxes 5,431 2,283 7,955 4,659

Other 25 234 22 24

③ NOI (①－②) 58,496 38,667 88,060 71,965

④ Depreciation 9,203 12,064 9,781 11,283



(③－④)

49,293 26,602 78,278 60,682

⑥ Capital expenditures - 5,279 4,913 9,757

⑦ NCF (③－⑥) 58,496 33,387 83,146 62,207

Book value at end of the period 2,125,948 1,717,372 3,857,869 3,264,488

(Note) Operating revenue from real estate leasing of Smile Hotel Namba includes variable rents of 25,571 thousand yen and

operating revenue from real estate leasing of Best WESTERN Tokyo Nishikasai includes variable rents of 14,229 thousand

yen.

－ 39 －


Property name Office

Total

Residence

total

Logistics facility

total

Hotel

total

Portfolio

total


from real estate leasing 1,001,373 549,514 953,094 287,993 2,791,975

Lease business revenue 906,707 523,452 912,876 287,993 2,631,029

Other lease business revenue 94,665 26,062 40,217 - 160,946



Management fee 67,881 27,665 30,961 3,802 130,310

Trust fee 3,467 2,869 3,015 1,684 11,036

Utilities expenses 78,609 13,204 39,174 8 130,997

Insurance premium 1,496 749 1,406 394 4,046

Repair expenses 21,345 31,232 11,534 4,277 68,389

Property taxes 66,185 26,317 62,936 20,329 175,769

Other 43,195 35,756 8,141 306 87,399

③ NOI

(①－②) 719,191 411,720 795,923 257,189 2,184,025

④ Depreciation 111,719 61,318 140,437 42,333 355,808



(③－④)

607,472 350,401 655,486 214,856 1,828,216

⑥ Capital expenditures 97,293 43,369 120,566 19,951 281,180

⑦ NCF

(③－⑥) 621,898 368,350 675,356 237,238 1,902,844


(reit) financial report for fiscal period ended july 31,...

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